When the last reassessments were done in Montgomery County, it was determined that the total average value in the Town of Blacksburg had gone up 4 percent (how they determined that you’ve got me). Per state law, anytime the average assessed value rises by 1 percent or more, a municipality is required to post the notice below (or something similar) announcing the effective change. In this case, it’s probably not a true tax increase – many properties within the Town saw values drop slightly, while few actually rose, so I wouldn’t expect to see a great number of increasing tax bills.

Assessment Increase: Total assessed value of real property, excluding additional assessments due to new construction or improvements to property, exceeds last year’s total assessed value of real property by 4.00 percent.

Lowered Rate Necessary to Offset Increased Assessment: The tax rate which would levy the same amount of real estate tax as last year, when multiplied by the new total assessed value of real estate with the exclusions mentioned above, would be $0.212 per $100 of assessed value. This rate will be known as the “lowered tax rate.”

Effective Rate Increase: The Town of Blacksburg proposes to adopt a tax rate of $0.22 per $100 of assessed value. The difference between the lowered tax rate and the proposed rate would be $0.008 per $100 or 3.6 percent. This difference will be known as the “effective tax rate increase.”

Individual property taxes may, however, increase at a percentage greater than or less than the above percentage.

Proposed Total Budget Increase: Based on the proposed real property tax rate and changes in other revenues, the total budget of the Town of Blacksburg will exceed last year’s by 14.2 percent more than last year’s budget.

One more thing …

I said above that I couldn’t imagine how they determined home values to have gone up 4% in Blacksburg. Turns out … I was kind of wrong. Below is a list of the average sales price for Blacksburg homes sold through the Multiple Listing Service since 2006:

I received an interesting email yesterday from someone “named” NKOR. The subject line read “Hokies vs. Hoos – no rivalry in home prices?“. With Rivalry Week upon us here in Blacksburg, and a little event this weekend that folks from both schools might be paying attention to, it certainly caught my attention.

“From the housing peak to 2012, markets in Florida, Nevada and California will be down around 60 percent.”

We’re certainly not without our share of scary real estate stories here in the New River Valley, but what’s it like to be selling a home in Arizona, California, Florida, New Jersey or Nevada right now? I remember several years ago that my mom sold her house in FL, just north of Naples. It sold in six months, thankfully, but nearly two years later homes were still for sale in her neighborhood that had been for sale before she went on the market. I can only imagine the stress and fear that has to cause – and for some (according to the Case-Shiller index) that’s going to continue.

Anyway, back to the Hokies vs. Hoos rivalry. Apparently NKOR reads Jim Duncan’s blog as well, because his email referenced a post Jim did yesterday linking a CNNMoney.com calculator that says the national median home price is expected to rise by 4% in 2011, and allows you to see your own market compared. According to the site, home prices in the Blacksburg-Christiansburg-Radford is predicted to see a drop of .03% between the first quarter of 2011 and the first quarter of 2012, while the Charlottesville area is expected to see an increase of 1.3%.

Take it all with a grain of salt, however. I’m not saying the New River Valley real estate market doesn’t need some help in some areas (see this, this or this), but the site says that we saw a 7.1% decrease in median home values between 3Q 2008 and 3Q 2009. When I look at the data, I see virtually no change in median home prices during that time period ($180000 in 2008, $181000 in 2009) … and if you take out everything but detached homes, there was actually an increase of 6% ($195000 to $207000).

The moral of the story? No one knows, so in the meantime I’ll keep on watching the market, and as I’ve been telling the folks I’m working with we’re going to keep on rowing. Oh, and we’ll have a good time Saturday. Go Hokies.

Sure, maybe there’s more pain to come in the housing market. But when Time magazine starts running covers that declare “Owning a home may no longer make economic sense,” it’s time to say: Enough is enough. This is what “capitulation” looks like. Everyone has given up.

After all, at the peak of the bubble five years ago, Time had a different take. “Home Sweet Home,” declared its cover then, as it celebrated the boom and asked: “Will your house make you rich?”

But it’s not enough just to be contrarian. So here are 10 reasons why it’s good to buy a home.

1. You can get a good deal. Especially if you play hardball. This is a buyer’s market. Most of the other buyers have now vanished, as the tax credits on purchases have just expired. We’re four to five years into the biggest housing bust in modern history. And prices have come down a long way– about 30% from their peak, according to Standard & Poor’s Case-Shiller Index, which tracks home prices in 20 big cities. Yes, it’s mixed. New York is only down 20%. Arizona has halved. Will prices fall further? Sure, they could. You’ll never catch the bottom. It doesn’t really matter so much in the long haul.

Where is fair value? Fund manager Jeremy Grantham at GMO, who predicted the bust with remarkable accuracy, said two years ago that home prices needed to fall another 17% to reach fair value in relation to household incomes. Case-Shiller since then: Down 18%.

2. Mortgages are cheap. You can get a 30-year loan for around 4.3%. What’s not to like? These are the lowest rates on record. As recently as two years ago they were about 6.3%. That drop slashes your monthly repayment by a fifth. If inflation picks up, you won’t see these mortgage rates again in your lifetime. And if we get deflation, and rates fall further, you can refi.

3. You’ll save on taxes. You can deduct the mortgage interest from your income taxes. You can deduct your real estate taxes. And you’ll get a tax break on capital gains–if any–when you sell. Sure, you’ll need to do your math. You’ll only get the income tax break if you itemize your deductions, and many people may be better off taking the standard deduction instead. The breaks are more valuable the more you earn, and the bigger your mortgage. But many people will find that these tax breaks mean owning costs them less, often a lot less, than renting.

4. It’ll be yours. You can have the kitchen and bathrooms you want. You can move the walls, build an extension–zoning permitted–or paint everything bright orange. Few landlords are so indulgent; for renters, these types of changes are often impossible. You’ll feel better about your own place if you own it than if you rent. Many years ago, when I was working for a political campaign in England, I toured a working-class northern town. Mrs. Thatcher had just begun selling off public housing to the tenants. “You can tell the ones that have been bought,” said my local guide. “They’ve painted the front door. It’s the first thing people do when they buy.” It was a small sign that said something big.

5. You’ll get a better home. In many parts of the country it can be really hard to find a good rental. All the best places are sold as condos. Money talks. Once again, this is a case by case issue: In Miami right now there are so many vacant luxury condos that owners will rent them out for a fraction of the cost of owning. But few places are so favored. Generally speaking, if you want the best home in the best neighborhood, you’re better off buying.

6. It offers some inflation protection. No, it’s not perfect. But studies by Professor Karl “Chip” Case (of Case-Shiller), and others, suggest that over the long-term housing has tended to beat inflation by a couple of percentage points a year. That’s valuable inflation insurance, especially if you’re young and raising a family and thinking about the next 30 or 40 years. In the recent past, inflation-protected government bonds, or TIPS, offered an easier form of inflation insurance. But yields there have plummeted of late. That also makes homeownership look a little better by contrast.

7. It’s risk capital. No, your home isn’t the stock market and you shouldn’t view it as the way to get rich. But if the economy does surprise us all and start booming, sooner or later real estate prices will head up again, too. One lesson from the last few years is that stocks are incredibly hard for most normal people to own in large quantities–for practical as well as psychological reasons. Equity in a home is another way of linking part of your portfolio to the long-term growth of the economy–if it happens–and still managing to sleep at night.

A house for sale in Shelby, Ohio

8. It’s forced savings. If you can rent an apartment for $2,000 month instead of buying one for $2,400 a month, renting may make sense. But will you save that $400 for your future? A lot of people won’t. Most, I dare say. Once again, you have to do your math, but the part of your mortgage payment that goes to principal repayment isn’t a cost. You’re just paying yourself by building equity. As a forced monthly saving, it’s a good discipline.

9. There is a lot to choose from. There is a glut of homes in most of the country. The National Association of Realtors puts the current inventory at around 4 million homes. That’s below last year’s peak, but well above typical levels, and enough for about a year’s worth of sales. More keeping coming onto the market, too, as the banks slowly unload their inventory of unsold properties. That means great choice, as well as great prices.

10. Sooner or later, the market will clear. Demand and supply will meet. The population is forecast to grow by more than 100 million people over the next 40 years. That means maybe 40 million new households looking for homes. Meanwhile, this housing glut will work itself out. Many of the homes will be bought. But many more will simply be destroyed–either deliberately, or by inaction. This is already happening. Even two years ago, when I toured the housing slumpin western Florida, I saw bankrupt condo developments that were fast becoming derelict. And, finally, a lot of the “glut” simply won’t matter: It’s concentrated in a few areas, like Florida and Nevada. Unless you live there, the glut won’t have any long-term impact on housing supply in your town.

I’ve spent the morning working on Activity Reports for my listings – they’re a look at a very refined, specific price point for each listing, and shows what’s happened in the New River Valley market in that price point during the last month. One of the things I found interesting was just how different our market is right now. While the Activity Report looks at a very specific section of the market, I also wanted to know what real estate had been doing across the entire residential market … the numbers were surprising.

I said in March I thought the real estate market was staying pretty strong, and I’m revising that a bit because, as I’ve told the Sellers I’m working with, I think I made a glaring mistake. In March, I wrote:

What’s it tell us? Well, for starters, the New River Valley real estate market as a whole is still pretty strong. With list to sale percentages averaging roughly 97% over the last three years in what’s typically a slow time for real estate (the November through February time frame), home sellers have been able to maintain strong sales prices. Average sale prices, however, can be swayed by a multi-million dollar sale on the high-end, or an inexpensive sale on the low-end, and so median sales prices might be an even better barometer of strength in the market … In 2008, the median sales price for the first two months of the year was 95.6%. The following year it climbed to 96.9% during that same time period, and in 2010 the median sales price in Blacksburg, Christiansburg and Radford was 99.9% of the list price.

While buyers certainly have their choice of options available to them when it comes to housing in the New River Valley, the statistics are showing that, even in the slow times of the year, sellers are still getting their asking prices. Looking forward to seeing if that continues through the year.

One thing is certain – buyers still have their choice of options available to them, and if they’ve got 10% or more of the sales price (err on the side of more) and staying in the home for three years or more, I still think it’s a great time to buy. Where I went wrong in the first quarter of the year though, was in relying on numbers that were skewed by the First Time Buyer Credit – remember that thing? And I feel foolish for doing it, since we had just gone through a similar situation with the incentives that had been floating around encouraging people to buy cars. I wasn’t being realistic. Uncle Sam offered money for cars, and car sales picked up, then when the money was taken away … auto sales dried up. Then, the First-Time Buyer Credit was instituted, and home sales picked up … until May 1st, when there was a giant sucking sound as buyers left.

It’s true, despite what the trade organizations would have you believe. Don’t believe me? Look at the chart below, showing the number of residential real estate closings in the 24060 (Blacksburg), 24073 (Christiansburg), and 24141 (Radford) zip codes over the last four years:

That’s what’s happening in the real estate market right now. Over the last four years, we’ve seen a 66% drop in the number of closings during the month of August. Data for 2007 isn’t available, but if you look at the same zip codes and look at activity January 1 and August 31 you’ll see a similar picture:

While the drop isn’t as steep (35% between 2008 to 2010) when spread over twenty-four full months, it’s still significant.

It’s scary stuff, particularly for home sellers without much of an equity position in their homes (read money put down), and as I mentioned in each of my Activity Reports for August, only three things matter if you’re selling a home right now – Price, Condition, and the Patience to wait. Look, only in a unique situation is an agent going to sell your home in three days. Unemployment is still a major concern for many buyers, and without the confidence that their job is going to be there for the long-term, they’re not buying anything. If you’re selling a home, and an agent tells you it should sell quickly, perhaps you should reconsider whether that’s really realistic before moving forward. And buyers – I know you’re out there – if you have money to put down and you expect you’ll be in the New River Valley for three years or more, buy. Let me say that again … BUY! Values are going to hold steady (they’re within 1/2% of where they were last year), inventory levels will stay high, and sellers are going to be glad to see you walk through the door.

Am I cheerleading? Nope – my team’s not down 49-0 in the 4th quarter and 3:00 minutes left. Am I taking a realistic look at what’s really happening? I think so … and what’s happening is going to benefit those buyers and sellers who are also being realistic.

You’re not moving anytime soon, sure, but everyone likes to know how well their neighborhood is retaining value, right?

Well, there’s an easy way to do just that, and all it takes is an email address. Just send me your name, email address and the neighborhood or area you live in, and I’ll make sure you’re notified every time a property in your neighborhood comes on and off the market. Be the envy of all your friends! You’ll know every price change, every sales price … you’ll be the life of the party!

But seriously, if you want to know how real estate values are doing in your area, then sign up for this automated service. I will not SPAM you … I’ve never contacted anyone who’s taken me up on this offer in the past, and I won’t begin doing so now. If it helps, I won’t even save your address – I just need to know it in order to set up the search.

I’ve just found that if you’re interested in following the values in your area, this is a good, real-time way to do that. I’ve set it up for myself to track my own neighborhood, and those of some of my former clients, and can do the same for you. Just contact me and I’ll set it up; I hope you find it useful.

Ever wondered just how high real estate climbed in the 2000’s? There’s a graph for that (with added text by yours truly):

The image is from the NYT, and was republished at Ritholtz.com. And I like it because I have to see things visually – I’m not theoretical, I’m visual. I have to see/touch/do it in order to get a real grasp of things, and I think it’s a great image.

Consider that on the left of the graph, in 1890, is the benchmark of $100000. If a home priced sold for $100000 (in today’s dollars) in 1890, you can then see how housing responded to events throughout history.

in World War I, that $100000 house would be worth ~ $94000 (hmmm – sounds like perhaps wars aren’t good for economies, but that’s another topic)

at the end of the Great Depression, that house would have been worth ~ $82000

at the end of the millenium, that house would have been worth ~ $109000

For 110 years, since 1890, the values of homes haven’t deviated much, plus or minus, without pressure from external forces (like wars and the Great Depression). During times of peace, the graph shows that for the most part home values haven’t moved up or down more than 20% at any given time … until the year 2000. Then the climb began, and what comes up must come down.

The Case-Shiller Index tracks residential real estate values nationally, across 20 major metro markets. Obviously, the Blacksburg/Christiansburg/Radford corridor is not going to be a major metro market (thank God), but the index still provides us strong factual figures, and informed projections on which we can make decisions.

So when people ask me what’s going to happen in real estate, armed with this image I’m going to say … “I don’t know” professionals from elmhurst real estate attorney have been trying to figure it out. Look, none of us do. Graphs are great, projections are nice, but at the end of the day people are going to buy what they can buy, or sell what they can sell. I’ll use the tools I have available to me, but it’s impossible to predict the future and be right most of the time. So here’s what I think is going to happen in the next 24 months:

Real estate values in the New River Valley will hold steady, plus or minus 2% of where they are right now

Inventory levels will remain high through 2010, with buyers having a lot to choose from

Appropriate, realistic pricing will remain key for sellers in all price points

Interest rates will rise, which will slow any value appreciations in the foreseeable future

I needed a chart

That’s what my economic projection for the New River Valley real estate market will be – now let’s see what happens. And in order for things to improve here locally, watch unemployment. As the unemployment numbers for the New River Valley go down, expect that consumer confidence – and the real estate market – will go up. In the meantime, keep this in mind – if you’re buying a home in the next six months, get serious. Yes, inventory levels will remain high, but interest rates will not remain as low as they currently are. I can’t tell you why I think they’ll rise, but I’ve seen rates quoted by local lenders, including Brandon Nicely, these past two weeks that I’ve never seen before. We’re talking fixed, conventional loan products at rates I would have said three months ago we’d never see … and the cynic in me says we won’t see them again (so refinancers, you too – you could save hundreds of thousands in interest alone). If buying a home is on your radar for the near term, we should talk.

When Natalie and I were looking for our first house, we did what most potential buyers do – we went online, searched various real estate websites, and flipped through a bunch of real estate ads that all looked the same. A little tiny box, with just a little bit of information about the house (maybe), and a big “Call me for all of your real estate needs” banner. Uhm … no. I want to search in the privacy of my own little bubble, surrounded by my thoughts and notes, sorting through all of my options.

We also walked a lot of streets. We’d park in a neighborhood we thought we might like, and then we’d wander the streets. We’d look at house styles, see what kind of a feeling we got from the neighborhood, that sort of thing, and sometimes we’d even happen upon a house that was for sale (this is how we found the house we eventually bought, actually). But all too often, when we found a house for sale that actually had a flyer box, the box would be empty. Sometimes there’d be flyers in there, but often they were so waterlogged they’d be unreadable. When we could read them, we were doing so because we wanted to find out about the house, not to get a phone number for the listing agent who wanted to do dual agency and get more money. And that’s what this guy was finding:

I don’t know if a buyer has bought one of my listings because of the professional real estate photos, or because the sign helped get them started with all of the information they might want to know, or because of a video walkthrough told them what it was really like being in the home. What I DO know is that I want all of that – and more – to be available … and I don’t want a song being written about my empty flyer box.

Six months of the year are behind us, and it’s a downhill race to the finish in 2010. To say it’s been an interesting year in real estate is an understatement – there was the rush to get under contract for the buyer credit, and then we’ve seen a much slower-paced market since April 30th. I posted the YTD real estate figures for Blacksburg last week; the Radford real estate numbers were posted earlier this week, and today’s it’s Christiansburg’s turn. Following are the sales and inventory figures in Christiansburg for the first six months of 2010:

Christiansburg Inventory Levels and Average Sales Prices

< $200000 – 9.6 months $146556

$200001 – $300000 – 12.0 months $240334

$300001 – $400000 – 6.48 months $353180

$400001 – $500000 – No Sales

$500001 – $600000 – No Sales

$600001 – $700000 – No Sales

$700001+ – No Sales

These inventory levels are referencing what’s called the “absorption rate” – how long it would take the market to “absorb” the current inventory if nothing else came on the market. In the New River Valley – and in most real estate markets, really – a balanced market is a figure of six months. Anything less than six months is a sellers market, anything more than six months is a buyers market. So by looking at how many homes are on the market in a particular price point, as well as looking at what’s sold over the last six or twelve months, we can get an idea of just how long it would take the market to absorb the current inventory levels.

A couple things jump out at me from the outset. First, this is the closest that I can recall the 12-month average sold price between Blacksburg and Christiansburg being so close. The $200000-300000 price point in both Towns is typically where the most number of listings can be found, and this is the first time I can remember the average sales price in Blackburg being so close to the average sales price in Christiansburg. With nearly 42% more sales in Blacksburg (126) than in Christiansburg (74), I suspect this is indicative of those two markets become much more similar – and that’s a good thing, because it takes away some of the “can’t buy into the Blacksburg real estate market” that many buyers mention. Second … no sales in the $400000 or higher price points?! If I’m a homeowner in those price points in Christiansburg, I’m frustrated.

Six months of the year are behind us, and it’s a downhill race to the finish in 2010. To say it’s been an interesting year in real estate is an understatement – there was the rush to get under contract for the buyer credit, and then we’ve seen a much slower-paced market since April 30th. I posted the YTD real estate figures for Blacksburg last week, and today it’s Radford’s turn. Following are the sales and inventory figures in Radford for the first six months of 2010:

Radford Inventory Levels and Average Sales Prices

< $200000 – 9.7 months $122055

$200001 – $300000 – 28.0 months $262443

$300001 – $400000 – 22.3 months $355997

$400001 – $500000 – 36.0 months $456000

$500001 – $600000 – 29.4 months $545583

$600001 – $700000 – No sales

$700001+ – No sales

These inventory levels are referencing what’s called the “absorption rate” – how long it would take the market to “absorb” the current inventory if nothing else came on the market. In the New River Valley – and in most real estate markets, really – a balanced market is a figure of six months. Anything less than six months is a sellers market, anything more than six months is a buyers market. So by looking at how many homes are on the market in a particular price point, as well as looking at what’s sold over the last six or twelve months, we can get an idea of just how long it would take the market to absorb the current inventory levels.

Radford is typically a slower market than many others in the New River Valley. Don’t get me wrong – inventory levels are high in Radford, but they are high just about everywhere else, as well. In Radford in particular, it’s a balance between what’s the lowest you’ll take for your home vs. the patience to wait in what is obviously a much slower real estate market. Price your home to sell, and make sure it looks better than everything else.

I’ve been spending the last couple of days digging into the real estate numbers for the New River Valley, and I thought I’d share some of the figures I’m finding so far. This post deals with sales and inventory figures in Blacksburg for the first six months of 2010, while subsequent posts will deal with market statistics for Christiansburg and Radford during the same time period.

Blacksburg Inventory Levels and Average Sales Prices

< $200000 – 8.53 months $143398

$200001 – $300000 – 7.51 months $247136

$300001 – $400000 – 10.9 months $345830

$400001 – $500000 – 17.4 months $435668

$500001 – $600000 – 12.0 months $545583

$600001 – $700000 – No sales

$700001+ – 20.0 months $803166

Whenever I look at inventory levels, I’m looking specifically at the “absorption rate” – how long it would take the market to “absorb” the current inventory if nothing else came on the market. In the New River Valley – and in most real estate markets, really – a balanced market is a figure of six months. Anything less than six months is a sellers market, anything more than six months is a buyers market. So by looking at how many homes are on the market in a particular price point, as well as looking at what’s sold over the last six or twelve months, we can get an idea of just how long it would take the market to absorb the current inventory levels.

In Blacksburg, real estate inventories are high. There are a lot of properties on the market, and not many coming off, and while as a home seller that may seem like a bad thing, it isn’t necessarily so. Every seller I’m working with is getting the same message – Price your home to sell, and make sure it looks better than everything else. The buyers that are out there will take notice …

The data relating to real estate on this website comes in part from the Broker Reciprocity/IDX (Internet Data Exchange) Program of the New River Valley Multiple Listing Service, Inc. Real estate listings held by brokerage firms other than Nest Realty are marked with the Broker Reciprocity logo (IDX) and detailed information about them includes the name of the broker.